Amazon shutters unprofitable Quidsi

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Dive Brief:

Amazon on Wednesday said that it would shutter its Quidsi unit, which the e-commerce giant bought in 2010 for $500 million to focus on its Amazon Fresh grocery effort, the company told Retail Dive. "We have worked extremely hard for the past seven years to get Quidsi to be profitable, and unfortunately we have not been able to do so," an Amazon spokesperson told Retail Dive in an email. "Quidsi has great brand expertise and they will continue to offer selection on Amazon.com; the software development team will focus on building technology for AmazonFresh."

Quidsi was founded by Marc Lore (now Wal-Mart Stores’ top e-commerce exec following its 2016 acquisition of Lore's follow-up venture, Jet)and operated six no-frills sites: Diapers.com for baby essentials, Soap.com for consumer products, Wag.com for pet supplies, Beautybar.com for health and beauty, Yoyo.com for toys and Casa.com for home goods.

Amazon said the Jersey City, NJ-based enterprise was unprofitable. More than 260 Quidsi employees will lose their jobs, though many will find opportunities at Amazon itself, according to news reports.

Dive Insight:

Much is being made of a fiery feud between Lore, who worked at Amazon for a few years after selling Quidsi, and Amazon founder/CEO Jeff Bezos, but it’s not likely that Amazon’s decision is any kind of subtle or overt message to Lore, whose efforts to overhaul Wal-Mart's digital business continue to gain momentum. More likely, Quidsi’s value to Amazon simply ran its course. The operation presumably lent Amazon plenty of insights along the way, highly useful as it boosts its own offering of consumer products through its private label efforts and its marketplace — including all the categories found at Quidsi’s sites.

In fact, Amazon's own private label goods, which include baby wipes, batteries, snacks, tech accessories, linens and other key product categories, are experiencing runaway growth, even emerging as the online leader in some categories, according to consumer spending research conducted by 1010data Market Insights. And Amazon is also enjoying explosive growth in other product categories, according to research from One Click Retail, including apparel, physical books, mattresses and home improvement.

“From a retailing and manufacturing point of view, it’s very hard to operate efficiently under many banners. Everybody goes to one type of store — everybody buys the same item in each category,” Keith Anderson, vice president of strategy and insights at e-commerce analytics firm Profitero, told Retail Dive. “As time goes on, it is less and less sustainable to support parallel domains, platforms, buying, marketing. This whole industry is built around choice — all of that creates complexity and inefficiency.”

Ultimately, Anderson says, that complexity could also pose challenges at Wal-Mart, which now houses Lore’s Jet unit. Like Quidsi, Jet is a consumer goods marketplace that puts low prices at a premium, though Jet boasts a “secret sauce” algorithm that empowers customers to tamp down their final price by making a series of choices on shipping speed, return policy, and other factors.